1) Lemond Cyclery custom produces cutting-edge triathlon bikes utilised by world-class athletes for main competitive events like the Ironman in Hawaii. Firm makes each bike by using its proprietary titanium blend, which is ultra flexible, super light, very strong, and very expensive. Its bikes sell for= $35,000 each. In 2014, company has= $4.5 million in revenue, and= $2.4 million in net income. Lemond Cyclery began the year with= $6 million in book equity on January 1. Complete the given, and illustrate all your computaions for each:
a) Estimate firm’s 2019 sales, suppose a 45% sales growth rate per year starting in 2015.
b) Suppose Lemond Cyclery pays out no dividends in 2014, determine the firm’s maximum sustainable growth rate?
c) Compare Lemond Cyclery’s probable sales growth rate and firm’s maximum sustainable growth rate (which you just computed in (b). Will firm be able to support its growth through internally generated funds? If so, explain financial reasons why this is so by using textbook’s concept of maximum sustainable growth rate. If you think firm will not be able to support its growth, use data to describe why, and explain what action management should take.
d) Part 1: If firm pays out= $960,000 in dividends during 2014, determine the firm’s retention rate? Part 2: Suppose the firm pays out= $960,000 in 2014 dividends, determines Lemond Cyclery’s sustainable growth rate?
e) After paying= $960,000 in 2014 dividends on December 31, compute Lemond Cyclery’s new book equity balance.
f) Use your final answer for (e) to reply the given: if Lemond Cyclery’s balance sheet illustrates assets with the book value of $9.6 million, how much debt does firm have?